May 28, 2022

Gold Bullion Coin Sales Steady In May But Plunge From Previous Year

2014-proof-gold-eagleThe sale of gold bullion coins by the US Mint remained steady in May compared to the previous month but declined sharply from year ago levels.  There are numerous theories on why gold demand and prices have not recovered in 2014.

The world seems to have regained confidence in paper money despite the fact that the financial system is now more leveraged than before the financial crisis and the debt problems which caused the financial crisis have simply been papered over with more debt.  Meanwhile, investors in both the stock and bond markets perceive risk to be low and the bulls outnumber the bears by a margin reminiscence of the pre-crash year of 2007.

The only asset class with a preponderance of bears seems to be precious metals.  When the crowd is leaning in one direction, it’s a perfect setup for an eventual price reversal suggesting that long term precious metal investors currently enjoy the opportunity to be greedy when others are fearful.

Despite the constant bearish rants, gold has been relatively stable during 2014.  After starting the year at $1,225 per ounce gold reached a high of $1,385 on March 14 and is currently at $1,244.50 for a gain of 1.6% on the year.

Gold Bullion U.S. Mint Sales Since 2000 as of May 31, 2014
         Year                            Ounces Sold
2000 164,500
2001 325,000
2002 315,000
2003 484,500
2004 536,000
2005 449,000
2006 261,000
2007 198,500
2008 860,500
2009 1,435,000
2010 1,220,500
2011 1,000,000
2012 753,000
2013 856,500
2014 217,500
TOTAL                                                9,076,500

During May the US Mint reported sales of 35,500 ounces of the American Eagle gold bullion coins, down from 38,500 ounces in the previous month.   Gold bullion coin sales plunged from last May when the Mint sold a total of 70,000 ounces.

Since monthly gold bullion coin sales can vary dramatically a look at the average monthly and year to date sales can give a more enlightened view on demand.  As of May 31, 2014 a year to date total of 217,500 ounces of gold bullion coins were sold by the Mint compared to 572,000 ounces in the comparable year ago period, a decline of 61.8%.  Average monthly sales of gold bullion coins during 2014 through May 31 were 43,500 ounces compared to 114,000 ounces last year.

Based on year to date sales, annualized sales of gold bullion coins for 2014 are projected at 522,000 ounces or a decline of 39.1% from the 856,500 ounces sold during 2013.

Strong Gold Demand and Dwindling Gold Deposits Make Gold a Compelling Investment

gold-bullionRobust gold demand and dwindling ore deposits represent an imbalance between supply and demand that almost guarantees higher long term gold prices.  As discussed in Peak Gold, almost all of the earth’s supply of gold reserves have already been mined.

At the end of 2012 it is estimated that all the gold ever mined in history totaled approximately 173,000 metric tonnes.  According to the Perth Mint, a study done by Natural Resource Holdings estimates that there are only about 56,674 metric tonnes of recoverable gold reserves left.  If this bleak assessment is correct, over 75% of the world’s total gold reserves have already been mined.

Further confirmation of the basic imbalance between supply and demand for gold can be seen in today’s release by the World Gold Council of gold demand trends for the first quarter of 2014.

  • Global jewellery demand rose 3% in the first quarter to 571 tonnes
  • Total investment demand fell slightly to 282 tonnes from 288 tonnes last year
  • The outflows from gold ETFs slowed dramatically to 0.2 tonnes compared to 177 tonnes in the first quarter of last year
  • Gold purchases by central banks was 122 tonnes in the first quarter, the 13th consecutive quarterly that central banks were net purchasers
  • Mine production increased by 6%

Although mine production increased slightly in the first quarter, new gold discoveries have plunged and the quality of ore reserves being mined is declining.  The Wall Street Journal reports that One argument for Big Gold: There ain’t much gold left.

The depletion of global gold mines, and the resulting increase in extraction costs, is one of the main forces pushing gold miners to combine as they look for efficiencies or to gain access to rivals’ high-grade deposits.

“There is every reason to do that deal, and the reasons not to do it weren’t geology, but man-made,” said Douglas B. Groh, a fund manager at Tocqueville Asset Management LP, which owns Newmont stock. “The nature of geology is such that gold does not occur in large volumes, but the capital exploiting it is robust.”

The gold industry ramped up exploration as prices increased by a factor of six from 2001 through 2012 to $1,750 a troy ounce. Prices since have tapered off to around $1,300 an ounce.

Discoveries also have tapered off. In 1995, 22 gold deposits with at least two million ounces of gold each were discovered, according to SNL Metals Economics Group. In 2010 there were six such discoveries, and in 2011 there was one. In 2012: nothing.

Even in Nevada, which mines around three-quarters of all U.S. gold, production has dropped a third since peaking in 1998. Around 40% of Newmont’s and Barrick’s production comes out of Nevada, with that possible economy of scale a big factor in their proposed merger.

“Deposits are simply harder to discover,” said John Muntean, an associate professor of mines and geology at the University of Nevada.

There also is simply less gold to unearth. All the gold ever mined could fit in a 60-foot cube. At around 0.005 parts per million, gold’s presence in the Earth’s crust is minute compared with that copper, at over 50 parts, or iron, at more than 50,000.

Miners are plowing through available gold reserves faster than they are other metals. Global gold production was equal to 5.1% of the 54,000 tons in available reserves last year, according to the U.S. Geological Survey, theoretically meaning it would take 19.5 years to exhaust supply. That compares with 38.5 years for copper and 28 years for iron ore.

On a long term basis, the supply and demand situation in the gold market strongly suggests much higher prices in the future.

Silver Remains in a Tug of War Between Supply and Demand

proof-silver-eagleAfter a fierce correction from the highs of 2011 have  the market forces of supply and demand resulted in a stabilized silver price?

On the demand side the industrial use of silver is at a nine year high with fabrication usage expected to rise to over 890 million ounces.   A wide variety of businesses use huge amounts of silver in the production of such items as jewelry, solar panels, electronics, cars, tableware, and photography.

Although silver is most commonly associated by many people as a precious metal investment the industrial demand for silver far exceeds investment demand.  For example, sales by the U.S. Mint of the ever popular American Eagle silver bullion coins hit a record last year of almost 42 million ounces (see Silver Bullion Coin Sales Soar) but this amount is a fraction of industrial usage. Since 2000 to date the U.S. Mint has sold over 292 million one ounce American Eagle silver bullion coins which amounts to only 32% of  estimated industrial demand for just one year.

Even as industrial demand for silver booms, Bloomberg News reports that investment demand for silver has diminished due to tapering of quantitative easing by the Federal Reserve, reduction of the safe haven appeal of silver, reduced demand by China, and the correlation coefficient between gold and silver.

Silver is being undermined by its association with gold.

gold-bullion

While makers of everything from jewelry to solar panels are buying the most silver in nine years, prices are languishing. Investors are dismissing industrial demand and instead focusing on the waning appeal of precious metals as a haven, with the Federal Reserve paring economic stimulus measures, inflation muted and equities rallying.

Silver has been dragged down by a yearlong slump in gold, the commodity most widely held by investors in exchange-traded funds, following a decade-long rally that saw prices for both surge more than sixfold. The five most-accurate precious-metals analysts tracked by Bloomberg over the past two years predict silver will average $18.80 an ounce in the third quarter, the lowest since 2010, and gold will drop 7.3 percent.

“The industrial driver can help, but I don’t think it’s as influential as the investor,” said Robin Bhar, head of metals research at Societe Generale SA in London and the most-accurate forecaster tracked by Bloomberg. “Investors were bullish silver because gold was in a bull market. Now that we have gold in a bear market, there’s less enthusiasm coming from investors.”

The correlation has been strong. From December 2008 to June 2011, silver tripled and gold surged 70 percent, with both touching all-time highs, as the Fed pumped more than $2 trillion into the financial system and cut interest rates to a record in a bid to boost the economy. Last year, when signs of economic growth sent gold down 28 percent, silver plunged 36 percent. The declines were the most for both metals since 1981.

Goldman said in an April 13 report that in the long term, silver tends to track gold, and its forecast reflects the historical ratio to gold. An ounce of gold bought 67.21 ounces of silver in London on April 30, the highest since July. The average over the past 30 years is 64.8.

The link with gold is stronger than that with industrial metals. The mean of silver’s 30-week correlation coefficient to gold was 0.86 over the past five years, compared with 0.51 with the London Metal Exchange Index of industrial metals, data compiled by Bloomberg show. A figure of 1 means two assets always move in the same direction.

“The precious-metal characteristic is likely to dominate,” said Barnabas Gan, an analyst at Oversea-Chinese Banking Corp. in Singapore, and the second-most accurate precious metals forecaster over the past two years. “The risk of higher real interest rates may likely magnify in the middle-long run, and thus raises the opportunity cost for holding silver. The improving global economic picture is also likely to pale safe-haven demand.”

Concern over the value of haven assets is trumping signs that industrial demand is improving. Half of silver supply is used to make things, more than the 10 percent for gold, and demand is picking up as economic growth fuels sales of electronics and cars from China to the U.S.

Since precious metals generally earn returns only through price gains, silver investors were “disillusioned” by the slump over the past year and put their money elsewhere, New York-based researcher CPM said in an April 29 report. Investment demand tumbled 42 percent last year to 105.3 million ounces, the lowest since 2008, according to CPM, which forecast average prices in 2014 will be lower for a third straight year.

SILVER DOLLARS

At the same time, fabrication usage including by makers of cars, jewelry and tableware will rise 2.9 percent this year to 890.7 million ounces, the most since 2005, CPM said. Silver content is increasing in vehicles with more electronics, according to Metals Focus Ltd., a London-based research company. After dropping last year, demand from electronics and battery makers will rebound in 2014, CPM forecasts.

Most industrial metals will get a boost from growth. The world economy expanded 2.1 percent in 2013 and will increase 2.8 percent this year and 3.1 percent in 2015, according to economists surveyed by Bloomberg. While that will help spur a 2.1 percent gain in industrial and photographic demand for silver, investors will sell 250 metric tons from funds backed by the metal, Barclays Plc estimates.

“Silver is not benefiting even though it has so much industrial use as people still call it a precious metal,” James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees about $357 billion in assets, said. “Its a tug of war between its safe-haven appeal and its use as industrial metal.”

Hedge funds have cut their bets on higher silver prices by 90 percent in the past two months on the Comex in New York, holding a net-long position of 2,620 futures and options in the week to April 22, U.S. Commodity Futures Trading Commission data show. The five-year average is about 20,510 contracts.

Despite a huge appetite for silver by industrial users, the reduction of investment demand and a production oversupply may continue to pressure silver prices. During 2014 HSBC is projecting an increase in silver supply to 1.09 billion ounces with demand remaining flat at 938 million ounces.

Until the financial system blows up again, the tug of war between supply and demand in the silver market is likely to restrain silver prices for the immediate future.

Sales of Platinum American Eagle Coins Slow Down After Fast Start

2013 Platinum ProofUS Mint Resumes Production of American Eagle Platinum Bullion Coin

The United States Mint first began minting the American Eagle platinum bullion coin in 1997 but suspended production in late 2008 when demand for gold and silver bullion coins skyrocketed in the wake of the financial crisis.  With its production capacity strained by huge investor demand for gold and silver coins, the US Mint decided to suspend the production of platinum coins.

In 2007, the year before suspending production, annual sales of the platinum bullion coin totaled only 9,050 ounces.  During 2008, the platinum bullion coin was sold up until November and a total of 33,700 ounces of coins were sold.  The coin had been available in one ounce, one-half ounce, one-quarter ounce, and one-tenth ounce sizes with legal tender values of $100, $50, $25, and $10, respectively.

In addition to the bullion version of the American Eagle platinum coin a numismatic proof version of the coin was also available from 1997 to 2008 in all four sizes.  Despite suspending production of the bullion platinum coins in 2008 the Mint continued to annually produce one numismatic version of the platinum coin for collectors.  The numismatic proof version of the platinum coin undergoes a specialized minting process at the Mint where they are struck multiple times with special dies that result in the coin having a softly frosted finish with detailed images that seem to float above the mirror like surface of the coin.

AE Platinum Proof Reverse

AE Platinum Proof Reverse

The 2014 American Eagle Platinum bullion coins are produced by the West Point Mint and only come in a one ounce size.  In March, the first month that the coins were available, the Mint sold 10,000 coins as authorized purchasers built up inventories for sale to the public.  Just as with the American Eagle gold and silver bullion coins, the public cannot buy them directly from the Mint but must purchase them through US Mint authorized purchasers or coin dealers.  April sales of the platinum bullion coins totaled only 1,200 ounces.

Platinum is one of the rarest of precious metals with annual production through mining and recycling of only about 7 million ounces.  The vast majority of all platinum mined comes from South Africa and Russia both of which have unstable political situations which has resulted in frequently curtailed production.  Platinum consumption is expected to exceed supply during 2014 with the deficit coming out of platinum stocks.

Resumption of the production of platinum coins by the US Mint now allows investors the opportunity to diversify their precious metal holdings

Gold Bullion Coin Sales Rise, Silver Bullion Coin Sales Could Hit All Time Record High in 2014

american-silver-eagleGold and silver bullion coin sales by the U.S. Mint during April turned in mixed results with gold sales up and silver sales down.  Despite the fact that gold and silver are in the bargain basement due to price declines, investment demand remains relatively subdued due to tapering of money printing by the Federal Reserve and the apparent recovery of the U.S. economy.

Investor perceptions of precious metals as a safe haven appear diminished despite the ongoing and unprecedented monetary easing by central banks and unrestrained government borrowings.  Gold began the year selling for $1,225 per ounce.  After reaching a high of $1,385 on March 14 gold  declined to a current price of $1,281.25 leaving it up on the year by 4.6%.

The U.S. Mint reported that sales of the American Eagle gold bullion coin in April totaled 38,500 ounces up 83% from 21,000 ounces sold in the previous month but down by a substantial 81.6% from April of 2013 when the Mint sold 209,500 ounces.  After dropping for three years in a row since 2009, sales of the American Eagle gold bullion coins increased in 2013 to 856,500 ounces up by 13.7% from total sales of 753,000 ounces in 2012.

(Sales figures for gold bullion coins on the charts below are as of April 30, 2014.)

 

Gold Bullion U.S. Mint Sales Since 2000
         Year                            Ounces Sold
2000 164,500
2001 325,000
2002 315,000
2003 484,500
2004 536,000
2005 449,000
2006 261,000
2007 198,500
2008 860,500
2009 1,435,000
2010 1,220,500
2011 1,000,000
2012 753,000
2013 856,500
2014 182,000
TOTAL                               9,041,000

Total sales of gold bullion coins year to date total 182,000 ounces.  Based on the current sales rate through April 30th, annualized sales of gold bullion coins would come in at 546,000 ounces, the lowest amount of sales since 2007 when only 198,500 ounces were sold.

Silver Bullion Coin Sales Could Reach Another Record in 2014

Sales of the American Eagle silver bullion coins remained strong in April with a total of 4,590,500 coins sold, down slightly from the previous month’s sales of 5,354,000.

The one ounce American Eagle silver bullion coin remains extremely popular with investors.  Total coin sales during 2013 reached an all time high of 42,675,000.  The previous record sales year going back to 2000 occurred in 2011 when investors scooped up 39,868,500 coins.  If the current sales pace continues, total sales of the silver bullion coin during 2014 could reach a record breaking 55 million ounces.

Why Gold and Silver Could Outperform Every Other Asset Class in 2014

gold-buffaloAfter almost a three year bear market in gold and silver it’s safe to conclude that most of precious metal bears have sold out and moved on.  As gold and silver prices corrected sharply over the past three years, the chorus of bearish sentiment in the mainstream press has become endemic, thus setting the stage for a powerful and unexpected contra rally.

What will set off an explosive rally in precious metals remains to be seen but there are plenty of potential triggers including war in the Ukraine or South Korea as well as the significant financial risk of collapsing asset bubbles engineered by the extremely loose monetary policies of the world’s central banks.

Here’s some of the most interesting recent commentaries on why 2014 could be a big year for gold and silver.

Gold and Silver Are Almost Ready to Rally

While every journey does begin with the first step, we need more evidence than a minor rally day to declare that a bull market has arrived. For the SPDR Gold Trust ETF (ticker: GLD), the April 24 rally was not very remarkable other than the fact that the day started with a loss and ended with a gain.
Now let’s talk about what it was rather than what it wasn’t.

For starters, it was an encouraging hold of short-term support from March. And the failure to set a lower low for the current two-month decline also falls on the bullish side of the ledger.

But more importantly, it was a suggestion that prices will not travel to the bottom of a giant year-long trading range again. In other words, any further strength now would tell us that investors are ready to buy. They will not wait for “better” prices to buy at the bottom of the range, and that means a shift in sentiment for the better.

Finally, the gold market has a “golden cross” in place. This is a condition where the 50-day average crosses above the 200-day average, and while it is really a stock market indicator, the macro look and feel are the same to me. After a long decline and period of sideways movement, this is the market’s first sign it has had enough healing. As long as the sideways trading range is not so long that the averages are completely flat, I think the signal is worthy of respect.

We can also we look at rising momentum indicators as bullish. Weekly charts show the relative strength index (RSI) setting higher lows between June and December even as prices set equal lows. This means the bears were tired as 2013 ended, and the fact that this indicator continued to rise this year suggests the bulls are starting to wake up.

Silver also had a bullish short-term reversal last week, but it has a lot more technical damage to repair. It does not have a moving average golden cross in place, and has already fallen rather close to its previous major lows from last year. Generally, that’s not a good sign, but in this case it’s not so clear cut.

When we look at the bigger picture using the iShares Silver Trust (SLV), we will see something really interesting. Recall 2010, when both gold and silver shot higher, but silver moved at a much faster pace than gold did. On the charts, we can see the technical launching point and breakout in August of that year.

As we see in many markets that appear to be bubbles, with such steep gains and ever-accelerating trends, the “bubble” part of the rally is often completely erased before conditions stabilize and then improve. Silver’s rally is now erased, which means the market is likely washed out and left for dead. Even so, there is a bullish RSI condition in place for the white metal, just as there is for gold.

 The Long Goodbye – by Andy Xie

The recent tumbling of Internet and biotech stocks may indicate that the speculation in such stocks has peaked. But, unlike in 2000, the bursting will occur in slow motion. The financial market structure has radically changed in the past 15 years. Too many money managers have a one-sided incentive to long such stocks.

The global financial system has experienced one bubble after another because major central banks have kept monetary policy loose. Prolonged loose monetary policy has made the financial system extraordinary large relative to the real economy. This change forces central banks to respond to negative shocks, like the bursting of a bubble, from the financial system. Such responses make the financial system even bigger. This vicious cycle explains why speculation has become such a powerful force.

A bubble cannot expand forever, even in an environment of loose monetary policy. The balance between fear and greed can tip over when the price of an asset becomes too high, like Internet stocks now relative to the average. The subsequent deflating bubble, in a continuing environment of loose money, just shifts air into other assets.

The talk of monetary tightening in the United States or China will not be followed up with strong enough actions. Real interest rates will remain negative until another crisis, like high inflation or hyperinflation or political crisis, force the hand.

Gold is the safe asset in today’s environment. As paper currencies lose credibility, the demand for gold will surge. The alternative digital currencies are fool’s good, really scams to take advantage of people’s fear over the potential collapse of paper currencies.

Two changes in the past 15 years have made bubble formation a constant feature of financial markets around the world. The inefficiencies in capital allocation and income redistribution to finance are the main reason for today’s sluggish global economy.

At the macro level, globalization has made inflation slow to emerge, as multinational companies can shift production around the world in response to cost pressure. This force has given central banks more room in increasing money supply without facing the inflation consequences for years. Hence, central banks around the world have become more active in response to economic fluctuations. The consequence is a rising ratio of money supply or credit to GDP. By definition, this means a bigger and bigger financial system, which needs more and more income to survive.

The real economy, as the previous analysis indicates, can only bear so much. Bubble formation has become central to supporting a bloated financial system. A large and bubbly financial system is unstable. Its periodic collapse brings down the economy, which triggers more monetary stimulus. Hence, constant monetary stimulus and an ever-expanding and bubbly financial system have formed a vicious cycle.

What’s Up With Gold and Silver? (Market Anthropology)

Anecdotally, we are seeing and hearing from those anxiously long the precious metals sector and contentiously short. With gold and silver down sharply in the early morning session – then reversing violently higher, the emotional spectrum in the market is likely diverged at or near another extreme. Over the past 10 months, both bulls and bears alike have been waiting for the next leg to commence. Instead, the market has played the jester – traversing a narrowing range and taking turns at frustrating both sides.

When will the argument resolve itself ?

Although it’s felt like a standing room only performance of Waiting For Godot, we expect long-term yields still hold the key to the next chapter for precious metals and the broader market story. We continue to view the move in 10-year yields as historically stretched to a relative extreme (see chart), a notion apparently lost on many participants as the Fed tapers their way to the end of QE and through an esoteric Fed cycle.
Just this week we saw that a Bloomberg survey of 67 economists unanimously expected 10-year yields to rise over the next six months (see Here). From a contrarian point-of-view, this should wake up participants that underlying sentiment is dangerously listing towards one side and the downstream and kinetic effects could be severe in many markets. The ratio chart below depicts the relationship between gold and 10-year yields, which as we noted last December had also reached a historic extreme. If and when long-term yields breakdown, we suspect a much stronger tailwind to develop behind precious metals.

As the Nikkei was breaking down at the start of the 1990’s, risk appetites changed and developed a palette for the Nasdaq. After the Nasdaq cracked going through the Millennium, investors turned to precious metals. The cycle can also come full circle, as we believe the performance and seasonal presentments of the current risk du jour describes. As the biotech index now turns down just past its zenith, we expect silver and the precious metals sector to begin making their way materially out of the trough they have trended towards over the past three years.

The Reformed Broker

Jeff Gundlach looks at the gold market. He’s not a big gold guy, but says that if you’ve held it this long (and through this much pain), “for god’s sake don’t sell it here!” He thinks the holders who remain are the quintessential, proverbial “strong hands” and that gold miner equities are completely underpriced for the potential of the metal running back up again. He’s more positive on commodities now in general, given how uninterested the investment community seems to be.

http://www.thereformedbroker.com/wp-content/uploads/2014/04/25.jpg

Silver Supply Glut Weighs on Silver Price – Time for Some Contrary Thinking?

proof-silver-eagleAnyone who has purchased silver in the past three years is now holding a losing position.

The price of silver soared from its low of around $10 during the height of the financial crisis to almost $50 per ounce in May 2011.  Since that time silver has had intermittent rebounds but the price trend remains in a distinct downward channel.  Is it time to double down or wait until silver breaks out of its current downtrend?

Contrarian minded thinkers may do well to keep in mind that the in and out speculators in silver are long gone and that there is still a steady worldwide demand for silver by both industrial users, jewelry makers, and investors.  Although it is easier psychologically to buy anything when the price is sharply increasing, that is not the road to big gains.  Most investors will admit that their biggest winners came from buying something when every “logical instinct” was telling them to sell.

kitco.com

kitco.com

Barron’s added some anxiety for silver bulls this week with commentary about the apparent supply glut in silver production that could keep a lid on silver prices.

Prices are sliding toward 10-month lows, as supplies of the metal are set to outpace demand for the sixth straight year.

For investors, that means betting on lower prices or picking another metal entirely. “Silver has the worst story of all the metals,” says Adam Klopfenstein, a senior market strategist with Archer Financial Services, citing the bountiful supplies and silver’s tendency to move in tandem with gold.

ON TOP OF THE POTENTIAL for higher interest rates, the silver market has been inundated with supplies of the metal. HSBC expects a 3.4% increase in the silver supply to 1.09 billion troy ounces in 2014, while demand will remain nearly unchanged at some 938 million ounces. Part of what’s fuelling that growth is that prices remain above the cost of production. On Friday, silver for June delivery settled near flat at $19.718 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices are down 10.6% off their Feb. 24 high of $22.051 an ounce.

The all-in cost of production for silver falls somewhere between $15 and $17 a troy ounce, making the metal highly profitable when the price hovers around $20 an ounce or above, according to Howard Wen, a precious-metals analyst with HSBC. This creates an incentive for producers to continue ramping up silver output, even while prices slip to much lower levels than a year earlier, he says.

In all probability, the so called over supply in silver has already been priced into the market and silver looks like it’s making a triple bottom in the $20 area.

1 year silver

Over supply situations can quickly turn to a shortage when investors recognize that the current price of silver is at bargain levels.  Meanwhile, purchases of U.S. Mint silver bullion coins continue at very strong levels with March sales up by 43% from the previous month.  Investors eager to scoop up silver at bargain prices bought an all time record amount of almost 42 million ounces of American Eagle silver bullion coins in 2013 and this year could see another record based on year to date sales.

Precious metal investing should not be a short term trade but rather a long term wealth preservation strategy.  A quick glance at any long term debt chart shows that the false prosperity of asset appreciation that occurred since the U.S. went off the gold standard was built on the shifting sands of credit creation and liquidity.  How long the Fed can keep the Frankenstein credit machine going is anyone’s guess but parabolic increases of debt (or anything else for that matter) become mathematically impossible to continue at some point.

CONSUMER CREDIT

Royal Canadian Mint Precious Metal Coins a Hit with Investors and Collectors

Maple Leaf goldThe Royal Canadian Mint has a rich history, striking its first gold sovereign coin back in 1908.  The Mint began production of the world renown Canadian Gold Maple Leaf in 1979 and introduced the 99.99% pure Silver Maple Leaf in 1988.

Investor demand for both the gold and silver Maple Leafs has remained strong year after year.  According to the Mint’s latest third quarter 2013 report, sales volume of the Gold Maple Leaf coins increased during the quarter by 17.5% to 195,000 ounces and sales of the Silver Maple Leaf coins increased by a very robust 40% to 6.7 million ounces.

In addition to gold and silver bullion coins, the Royal Canadian Mint produces a wide variety of stunning coins for collectors and investors including such innovative coins as the $20 for $20, a silver coin that has both a face value and a price of $20 (see How to Buy Physical Silver with a Zero Chance of Loss).

Here is a look at some of the most popular and unique coins currently being sold by the Royal Canadian Mint that are a representation of Canada’s rich culture and history.

1 oz. Fine Silver Coin - 100th Anniversary of the Royal Ontario Museum - Mintage: 8,500 (2014)

1 ounce silver coin commemorating the 100th anniversary of the Royal Ontario Museum.

Fine Gold Coin - Pope John Paul II - Mintage: 1,500 (2014)

Pope John Paul II fine gold coin with a mintage of only 1,500 pieces.

Pure Gold Ultra-High Relief Coin - Matriarch Moon Mask - Mintage: 500 (2014)

Matriarch Moon Mask ultra-high relief pure gold coin.

$20 for $20 Fine Silver Coin - Canada Goose

Fine silver Canada goose coin with $20 face value and a price of $20.

$20 for $20 Fine Silver Coin - Bobcat (2014)

$20 for $20 Bobcat coin made of fine silver.

Silver Bullion Coin Sales Soar In March, Gold Coin Sales Slump – Are Coin Buyers Stupid?

2014-proof-gold-eagleThe March sales report of American Eagle bullion coins by the U.S. Mint showed a large drop in gold bullion coins while sales of the ever popular silver bullion coins soared.

Sales of the American Eagle gold bullion coins in March totaled 21,000 ounces, down by 32% from February’s total of 31,000 ounces and down by a dramatic 66% from March 2013 when 62,000 coins were sold.  Year to date sales through March of 143,500 ounces of the American Eagle gold bullion coins plunged 51% from the comparable period last year when the U.S. Mint sold 292,500 ounces.

The decline in sales of gold bullion is in marked contrast to last year when sales boomed despite an almost 30% decline in gold prices, the worst performance since 1981.  Investors in physical gold across the globe viewed the decline in gold as a buying opportunity.  Sales of gold coins in 2013 by The Perth Mint soared over 40% while sales by the Royal Canadian Mint surged over 80%.  Sales of American Eagle gold coins by the U.S. Mint in 2013 jumped by 6.3% to 800,500 ounces.

Are Gold and Silver Bullion Coin Buyers Stupid?

While gold rebounded in 2014 from a low of $1221 to as high as $1385 before pulling back to a current price of $1284, perhaps buyers are waiting to see if the rally in gold will continue or if gold will decline again in 2014 as predicted by the likes of Goldman Sachs.  Long term it does not matter since the entire concept of fiat money has never ended well over the long term.  According to Bloomberg, the “long term” may be upon us sooner than many think.

Sound money and sound banking policies of governments have always been suspect but since the financial crisis of 2008, the entire concept of sound money has been utterly abandoned on a global basis as central banks printed trillions of dollars to support a financial system that imploded due to over indebtedness.  “Curing” the problem of too much debt with more debt and printed fiat money has in many people’s mind saved the world financial system, a tenuous theory at best.

1881-CC-Morgan-Dollar

According to the Bank for International Settlements, the amount of global debt (primarily government borrowings) has soared by a staggering 40 percent to $100 trillion since 2008 with the U.S. in the lead increasing the national debt to $12 trillion from $4.5 trillion at 2007 year end.  Fast forward to the next recession which could have its roots in a variety of events from the collapse of Japan’s epic empire of debt to the start of a serious military conflict over Ukraine driven by the warmongering military industrial complex in the U.S.  Another serious economic crisis, whatever its genesis, will result in money printing on an unimaginable scale as central banks do the only thing they can do which is to print more money.

Buyers of physical bullion are long term investors who understand what’s happening and are buying the only true money that cannot be debased by government profligacy and rapacious tax policies.  In the meantime, fluctuations in the price of gold caused by speculators such as hedge fund operators who can push around the price of physical gold without ever owning it through the use of futures contracts or options merely provide fantastic buying opportunities when they slam down gold prices.  Long term gold and silver are the only protection to preserve wealth against governments determined to debase fiat money to keep the highly leveraged financial system from imploding.  Current gold buyers will at some point will be holding an asset that soars in value as confidence in central banks completely evaporates as the value of paper money collapses.

American Eagle silver bullion coins meanwhile continue to soar and are a much more affordable option for many buyers compared to gold.  March sales of American Eagle silver bullion coins soared in March to 5,354,000 ounces, up by 43% from the prior month’s sales of 3,750,000 ounces and up by 60% from the March 2013 sales of 3,356,500 ounces.   Sales of silver bullion coins also increased dramatically in 2013 to a new record high of almost 42 ounces, up from almost 34 million ounces in 2012.  Based on annualizing the year to date sales of silver bullion coins, 2014 could turn out to be another block buster year with sales approaching another record of over 55 million ounces compared to 42 million ounces in 2013.

Buyers of physical gold and silver are long term investors who are intelligently protecting their wealth against governments hell bent on inflation and debasement of the currency in order to keep the house of debt cards from collapsing.  Accordingly, short term declines in the sale of gold bullion coins is totally irrelevant.

The Rationale for Owning Gold and Silver Is Stronger Than Ever

1933-double-eagle1By: GE Christenson

Consider our economic world from two perspectives:

The Deviant View – as represented by those who visit deviantinvestor.com, read alternate media, are skeptical of the “official” news, and who critically examine the financial world.
or
The others – call it the mainstream media view.
Deviant readers are more likely to believe:

  • The US government gold supposedly stored in Fort Knox and at the NY Federal Reserve is mostly gone. (Deviant Investor survey showed that over 81% believe that less than 20% of the gold is actually available.)
  • The Federal Reserve will eventually be forced to increase QE instead of reducing it. (Deviant Investor survey showed that 62% believe that QE will be increased to $100 Billion per month, or more, by the end of 2014.)
  • Gold bottomed in December and is going to new highs. (Deviant Investor survey indicates that 92% believe that gold has bottomed and is going to new highs.)
  • The Federal Reserve has, over the past 100 years, debased the dollar, produced inflation, and substantially increased the profits for the financial industry mostly at the expense of the American people.
  • Dollars are unbacked debt based Federal Reserve Notes that work well for daily commerce. However, they have no intrinsic value and, in terms of decades, been not been a good store of value.
  • Gold and silver are excellent for savings and investing at the present time, have intrinsic value, and are a store of value over the long term.

SILVER DOLLARS

Mainstream Media View

  • Of course the gold is still physically stored in Fort Knox and at the NY Federal Reserve! Why would it not be there?
  • QE will be reduced, the economy is beginning to grow, and the economy will appear much healthier in time for the 2016 elections.
  • The Syria intervention that did not happen was mostly about human rights, not gas pipelines or control over energy markets.
  • The stock market is a good measure of economic health, even though it primarily benefits the upper ten percent of the US populace.
  • Pension funds are seriously underfunded, but they will be fine – with only a few exceptions – as always.
  • Social Security is a “pay as you go” retirement plan for Americans; and even though it is a legally sanctioned “Ponzi Scheme,” it is a solid system.
  • Politicians will be politicians, but for the most part, the US political system works with only a modest amount of corruption and inefficiency.
  • If you like your health plan, you can keep it. If Crimea votes to join Russia, they can. If you don’t want to pay taxes, … well, that is a different issue.
  • If you run a too-big-to-fail bank, you need not worry about breaking the law or prosecution, since the bank is necessary for the survival of the economy.
  • Stocks are good, gold is bad. Per Warren Buffett, “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it.” From Charlie Munger, “Civilized people don’t buy gold.”

And there you have it – a simple summary of the Deviant view versus the Mainstream view.

Implications

Suppose that 50% to 80% of the gold in Fort Knox and the NY Fed is either gone, leased, or rehypothecated. Suppose that China has amassed the largest horde of gold in the world. Do these suggest the price of gold is likely to increase over the next few years?

Suppose that the Federal Reserve is forced via market conditions (interest rates rising, the S&P crashing, war, dollar collapse, financial melt-down, or other possibilities) to expand the QE program and to “print and purchase” $100,000,000,000 or more per month of distressed paper, damaged derivatives, flaky mortgage-backed securities, and increasingly large quantities of dumped T-bonds and notes. Do you think this will support the price of gold over the next few years?

money printing

Suppose that gold double bottomed in June and December 2013 after being crushed by the naked short sales in April and June of 2013. Suppose that the unintended consequence of that market take-down was increased demand for physical gold, particularly from Asia and the Middle East. Does the new uptrend and increasing world-wide demand for gold suggest higher prices in the next few years?

Suppose that, for whatever reason, the world launches into another cycle of war, several countries send troops to various spots around the world, and the US engages in one or several hot wars. Will this increase the deficit, increase the national debt, increase financial and social anxiety, upset the stock market, and suggest higher gold prices?

Summary

The Deviant View: Gold has bottomed, the US deficit will expand, the national debt will continue its exponential increase, and consumer prices for the things we need, such as food and energy, will substantially increase. War, fraud, and corruption will increase prices more rapidly.

The Mainstream View: You can keep your health plan, NSA spying on everyone is mostly good, wars keep the economy healthy and moving, the stock market will continue to roar higher, and, as former Vice President Dick Cheney stated, “Reagan proved that deficits don’t matter.”

Another View On Gold: The following are comments that I have paraphrased from another site that dislikes gold. (I disagree with all of these comments.)

  • If and when humanity advances, the value of gold will be zero.
  • The problem is that gold is not an asset because it produces no return.
  • Gold is not only high-risk but also costly since it pays no return.
  • Gold is not a savings vehicle.

I express my opinions, and I expect others to do the same. There will be disagreements. We all experience the consequences of our thoughts and actions. This is why it is so important to perceive economic reality clearly. A belief in current delusions and the uselessness of gold will be expensive.

Additional Reading

Andrew Hoffman: “Deflation,” and Why You Must Own Precious Metals – Now!

Hugo Salinas Price: We Cannot Get Away From Gold or Silver

GE Christenson
aka Deviant Investor